Hotel Construction Boom on the Way for Australia

Experts speculate Australia may be on the cusp of a 5 year hotel and accommodation facilities construction boom as new development activity continues to benefit from an upsurge in investment as rising tourism activity and boosted occupancy rates bolsters investor confidence.

Deloitte isn’t alone in predicting good fortune for hotel construction. The Australian Construction Industry Forum (ACIF) also believes the dollar value of accommodation building work done will hit $2.123 billion by 2018/2019. If they’re right, this windfall would be double the $1.040 billion achieved in 2013/2014.

“We are in a period where conditions in this market continue to strengthen and occupancy levels with the exception of Perth and Brisbane have strengthened. Therefore, I think it is right to say that there would be an increased in levels of investor interest and certainly anecdotally, that is the case. In terms of the numbers of projects, that hasn’t shifted significantly [yet] and I think it would be quite right to believe that would shift at some point,” said Lachlan Smirl, Deloitte partner.

Why is Tourism Recovering so Strongly?

The low Australian dollar is a massive driver behind much of this sky-rocketing tourism growth. The dollar is making Australia incredibly appealing to overseas visitors as these travellers can now book a flight to Australia for around a third of what it cost them 2 years ago, when the Australian dollar was at its height.

China’s growing middle class is another factor to take into account. As Chinese middle families amass more wealth we will keep seeing an increase in the number of Chinese middle class able to afford holidaying further afield. Australian inbound tourism from China over the last 5 years has jumped by almost a quarter.

Deloitte Predicts

Predictions from Deloitte Access Economics, a consultancy firm:

1. The Deloitte data forecasts that over the 3 years until 2017, international tourist numbers will keep rising at a yearly average rate of around 5.2%, while domestic tourism will slow down, but will continue to remain slightly above average at 2.7%.

2. Growth in demand for accommodation nights will outpace room supply by nearly 2 to 1. Vacancy rates could also rise by 70%.

Deloitte Data Highlights

Over the first 7 months of 2015, 41,000 short term arrivals visited Australia, up by nearly a fifth on the same time period 2 years before. Not only this, but domestic travel flights also rose by 8.5% on the preceding year in the March quarter.

Conference delegates overall spending levels continue to rise moderately.

Thanks to increased delegate spending, national occupancy rates have shot-up tremendously to new record highs sitting loftily around 68%. In Sydney and Melbourne occupancy rates are just shy of 90%.

Hotbeds of Future Major Market Activity According to ACIF & Deloitte Information

Gold Coast & Tropical North Queensland accommodation construction projects:

Melbourne accommodation construction projects include, but not limited to: 

Sydney has seen its value of work double in the 2 years until 2014/2015, with high levels expected to continue into the future.

Brisbane should pick up pace, growing fast and hitting its peak in 2017/2018.

Perth is also expected to improve despite the mining downturn weakening occupancy rates.

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